Smurfit Kappa deconsolidates its Venezuela unit after state seizure

Smurfit Kappa has deconsolidated its operations in Venezuela, after losing control of the unit to the country’s government, resulting in a €60 million write-down of net assets.

The company said it has been unable to manage the affairs of its Smurfit Kappa Carton de Venezuela (SKCV) division after authorities temporarily seized control of the unit on 28 August 2018.

Since then, Smufit Kappa said SKCV has no longer been responsible “for the use of its installations, machinery and equipment, its employees’ safety, that of its surrounding communities, any environmental impact, or the quality of the paper and packaging manufactured in the operations”.

It added that two of the firm’s employees have been arrested and that it is seeking their full release “through all available means”.

In a statement, the company said: “In light of these circumstances, and in order to protect the interests of its stakeholders and mitigate operating risks, Smufit Kappa Group has notified the government that full responsibility for the company’s operations and compliance with all applicable regulations have passed to the Venezuelan state from the date of the notification of the occupation order.”

The company’s Venezuelan operations will be deconsolidated in the third quarter of 2018. Smurfit Kappa highlighted that SKCV represented less than 1% of the Group’s EBITDA in the first six months of 2018.

SKCV has been operational in Venezuela for almost 65 years and today employs around 1,600 people. The company said that during its time in the country it has “operated to the highest business and ethical standards, invested significant amounts of capital in its business, developed a highly progressive corporate social responsibility programme and dedicated significant financial support and resources to the education and health of the less privileged members of the communities in which the company operates”.

Earlier this year Kellogg announced it was discontinuing its operations in Venezuela, blaming the country’s “economic and social deterioration”.

The company said product distribution in Venezuela has been suspended and the license agreement for the use and commercialisation of its brands has been terminated.